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City Controller: AVI could drive residents from Philadelphia’s best neighborhoods

City Controller Alan Butkovitz (standing) laid out a case against AVI at a meeting of the Chestnut Hill Community Association. (Photo by Pete Mazzaccaro)

by Wes Ratko

In an appearance Thursday night at the Chestnut Hill Community Association’s board of directors meeting, City Controller Alan Butkovitz laid out a case against the proposed Actual Value Initiative that would transform Philadelphia real estate, arguing the change could very well raise taxes so much that it would drive residents out of the city’s best and growing neighborhoods.

Butkowitz distributed a table that compared three different scenarios of real estate taxes in Chestnut Hill under AVI to the taxes in other comparable suburban communities where “Chestnut Hill residents might choose to relocate.” Under the city’s proposed 1.8 percent tax rate, Jenkintown Borough, Hatfield Township, and Whitpain Township all had lower taxes than the city.

Currently, Philadelphia real estate taxes are a 9.2 percent payment of one-third of the assessed value of a property. The AVI proposal would restructure city tax policy to consider 100 percent (or actual value) of a property’s market value, with a lowered tax rate to compensate. That rate, lowered to 1 percent, would result in “a bell-shaped curve of assessment,” Butkowitz said.

According to Butkovitz, the impact of an AVI tax structure would be a minor reduction on property in certain parts of the city, but for the growth areas like Center City, South Philadelphia, Northern Liberties, “the sky’s the limit.” Butkowitz warned that, in some cases, property owners could see their property taxes double or even triple. He said he’s concerned with the social impact of that kind of change.

“What the proponents of this [measure] have done is myopically seized on the fact that there is a deviation between the values assigned to certain properties in terms of the percentage by which that property is being taxed,” he said.

The proposition assumes that taxes in Philadelphia are generally fair, but Butkowitz said, this is not the case. He said that 25 percent of the land area in the city is owned by non-profits and, therefore, exempt from taxes. The difference, he says, has to come from somewhere.

Butkowitz referred to an attempt in the legislature to pass a constitutional amendment that would allow the anti-tax advocates to expand the loophole afforded to non-profits.

“If the University of Pennsylvania gets more loopholes in the taxes they have to pay, and we’ve got to raise the $1.1 billion a year in real estate tax, you know where that burden goes,” he said.

A potential solution offered by city council is a so-called “homestead exemption,” which would reduce the assessed value by $15,000 or $30,000 on property owners who have lived in their homes for a certain set number of years. In theory, this would mitigate the impact the next tax structure would have on middle-class people.

But for every exemption, Butkowitz warned, the city loses tens of millions of dollars. “The only fix for this is,” he said, “is to raise the tax rate on everyone.”

Such an increase would be especially impactful in areas of the city that have seen a lot of property value appreciation. He suggested that a high enough tax rate would drive a mass exodus from the city. He added, however, that city council does not have the legal authority to enact a homestead exemption.

When he asked those present whether they believed this would create a vacuum to encourage an exodus from Chestnut Hill, the crowd voiced its agreement.

Butkowitz was adamant that city council did not know all of the factors at play in imposing this new tax structure, and said that the unforeseen consequences were limitless. “This is an experiment where the consequences are really the life and vibrancy of the city,” he said.

Board member Jean Wedgewood expressed her dismay at the state of the Philadelphia school system and asked what the benefit is to residents whose taxes are raised.

“How long will our taxes go up to buffer a failing school system?” she asked. Butkowitz told her that until the anger of taxpayers is heard from city council, it will continue.

Board member Elizabeth Bales asked Butkowitz to suggest actions the community could take to prevent city council from voting for this.

“Raise hell,” he said. “Annoy the people concerned to keep the AVI tax rate to 1 percent, stay alert, monitor what city council does; marshal support against it as the measure advances…city council is very sensitive to visible signs of public opposition.”

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Sounds like Mr. Bukovitz is in the corner of the people in this city, unlike Nutter and City Council who expect those of us with SOME money to support the poor and disadvantaged they’ve ignored for so long.

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